Bernard Madoff will remain free on $10 million bail, thwarting US prosecutors who attempted to have the Ponzi scammer jailed for violating his bail conditions.

Judge Ronal Ellis said yesterday that Mr Madoff, who was arrested last month for allegedly defrauding investors of $50 billion with his fake investment business, would remain under 24-hour house arrest at his penthouse apartment in Manhattan.

Prosecutors had argued that Mr Madoff's bail should be revoked after he and his wife Ruth mailed valuables worth more than $1 million to relatives and friends at Christmas, which was in violation of a court-ordered freeze on Mr Madoff's assets.

Investors have sued Mr Madoff and his company Bernard L Madoff Investment Securities in an attempt to recoup their losses. The asset freeze relates to these law suits.

Ira Sorkin, the fund manager's lawyer, said that Mr Madoff was not aware that the freeze applied to personal items.

Mr Madoff has not yet appeared in court to formally answer the charges against him. When he does so, prosecutors can again ask for him to be jailed.

Judge Ellis did impose new bail conditions, including ordering Mr Madoff to compile an inventory of all items he has in his home and barring him from transferring property.

The items sent at Christmas included a Cartier watch, diamond jewellery and a $200 pair of mittens. Mr Sorkin said that the Madoffs wanted to distribute to loved ones family heirlooms that they were unlikely to use again.

But prosecutors argued that the mailings were an attempt to hide his assets and indicated an increased risk that Mr Madoff would flee the country before he could be brought to trial.

If convicted, the 70-year-old faces up to 20 years in prison and millions of dollars in fines.

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